I have been waiting for the reappraisal of Greenspan’s tenure to begin, and it might have started. Here you had a Fed chief who was more interested in understanding the stock market than money supply (see a Wall Street Journal May 9, 2000 first page story for confirmation) and who also appears not to have […]
Read more...The Wall Street Journal features a story, “Boom Aside, Not All LBOs Look So Hot,” which reports that some LBOs are in trouble a surprisingly short time after the deal closed. Now the Journal goes to some lengths to present these failures as deal specific by stressing that these cases are isolated, the economy is […]
Read more...For quite some time, we have written about indifference to risk, unjustifiable asset prices in many markets, and high levels of liquidity all as different aspects of what John Authers called “overvalued credit” meaning overly bullish (more accurately speculative) conditions in debt markets which fuelled overheated conditions in asset classes that could be financed (and […]
Read more...This story by Tim Bond in Thursday’s Financial Times, provides an excellent explanation of how a change in the universe of bond investors has produced new outcomes, like a difficult-to-explain negative yield curve. It also looks prescient in light of the plummet in long-dated Treasuries that day. Bond’s article says that “long term bonds are […]
Read more...Readers may notice today that we are a bit heavy on Financial Times stories. In part, that’s because the FT has a healthy respect for the fixed income markets. Political consultant and pretty scary guy James Carville once remarked, “I used to think if there was reincarnation, I wanted to come back as the President […]
Read more...Edward Charles Ponzi Jr. occasionally comments at Angry Bear, and a recent submission became a post of its own. Ponzi makes several observations: what we have counted as growth (as in GDP growth) may be largely inflation (that statement is more accurate than you might think after you back out hedonic adjustments); that a lot […]
Read more...We are late to this excellent post by Barry Ritholtz (which also reminds us of the consistency of Business Week covers as a counterindicator; this example is from February 2007). And I’ve wanted to say something about rates creeping up, but I got beaten to the punch (although we have made the currency-realted observations, #5 […]
Read more...Michael Panzner pointed us to a Bloomberg column by John Berry, “Fed Officials Fret Another `Russia’ May Occur.” Frankly, we are delighted to read this. It is high time the Fed woke up and took stock of the excesses taking place in virtually every asset class. Not only do we have very high liquidity, asset […]
Read more...This Financial Times article, which describes the growing role that asset-backed securities play in investment bank profits, comes as no surprise. Not only are these products significant in terms of total revenues, but they are more profitable than the norm for these firms. But connect the dots: Wall Street is one of the biggest funding […]
Read more...Mark Thoma quotes a Washington Post op-ed piece by Daniel Gross that gets worried about the current and prospective level of foreign ownership of US businesses: …In countries that are resource-rich or export powerhouses, governments and government-controlled entities have amassed huge pools of capital. A report issued last month by Morgan Stanley economist Stephen Jen […]
Read more...One of Wall Street’s ongoing pin-the-liability-on-the-chump exercises is finding purchasers for the riskiest (often called “equity”) tranches of asset backed securities and CDOs, which in the trade are called “nuclear waste.” They come about because the attractive upper tranches get priority in the distribution of cash flow and may also be overcollateralized or credit enhanced. […]
Read more...The Journal’s front page story, “Homeowners Abroad Take Currency Gamble in Loans,” had numerous anecdotes about how Eastern Europeans are active in the carry trade, borrowing in cheaper currencies, gambling that the interest rate savings won’t be offset by currency appreciation. Some have compared the carry trade to picking up nickels in front of a […]
Read more...I have spent the entire long weekend avoiding dealing with this article by David Ranson and Penny Russell, “Does the Fed Matter?” in Friday’s Wall Street Journal. The reason is that if I got going, there is so much in it that is off beam, misleading, or just plain wrong that it would be hard […]
Read more...Nouriel Roubini looked at the various stats released last week – the 16% increase in new home sales versus the 1.4% fall in home prices averaged across 32 metropolitan areas (Federal Housing Finance Board survey) and the 2.6% fall in existing home sales from March to April (National Association of Realtors) and focused on the […]
Read more...This article ran on MarketWatch, and I find it a sign of the times. Despite the supposedly sound state of the economy (if you call a tanking housing market and 1.3% GDP growth, which is negative in real terms, “sound”), MarketWatch nevertheless thought this story would appeal to its target audience, the investing class. The […]
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